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PIC signs £2 billion deal with OBSPS trustee

written by Bella Palmer

The deal should guarantee future pension payments for all members at, or above, PPF levels of compensation

Pension Insurance Corporation plc, a specialist insurer of defined benefit pension funds, has signed a £2 billion pension insurance buyout with the Trustee of the Old British Steel Pension Scheme (OBSPS).

The deal should guarantee future pension payments for all of the more than 30,000 members at, or above, Pension Protection Fund (PPF) levels of compensation.

In 2016, the Government launched a consultation on changes to the pension scheme - the huge pension liability with a deficit of £700m reported at the time - that was seen as a deal-breaker for prospective buyers of Tata Steel's UK assets.

Liberty bought the Speciality Steels business from Tata Steel in 2017, including sites in Rotherham.

The Scheme entered PPF assessment in 2018 following the restructuring of Tata Steel UK Limited. PIC worked closely with the Trustee to establish that the Scheme had sufficient funds to support a buyout of the Scheme and, importantly, to enhance members’ benefits above those payable by the PPF for any members who lost out as a result of entering the PPF assessment. PIC was able to structure the transaction in a way that gave the Trustee price certainty in the current, volatile financial markets.

The Scheme will now go through a period of reconciling member benefits and calculating uplifts where applicable, whilst the overall benefits are guaranteed by PIC within a buy-in structure. The process is expected to complete towards the end of 2021, when the members will come out of the PPF and become direct PIC policyholders.

Open Trustees Limited has been the Scheme’s Trustee since 29 March 2018. It is an independent entity but is wholly owned by international law firm, Osborne Clarke LLP. The Trustee was advised by Barnett Waddingham LLP and Hogan Lovells. PIC was advised by HSF.

Jonathan Hazlett, Managing Director of Open Trustees Ltd, said: We are delighted to have entered into this buy-in policy with PIC. This transaction will eventually see OBSPS members receive benefits either at the same PPF level as those currently provided or, for many members, an uplift above that amount.

It has been difficult for the OBSPS members over the last few years. Whilst the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected. OBSPS members can take comfort that their benefits will be looked after by an insurer which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority, as well as being committed to the highest levels of customer service, Hazlett said.

Rosie Fantom, Partner at Barnett Waddingham, said: This is a significant step in what has been a long journey for OBSPS members, who now have the certainty that their benefits have been secured with an insurer on very favourable pricing terms in a turbulent market. Rigorous work carried out over the last two years allowed the scheme to take full advantage of bulk annuity pricing.


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